Brussels, 16/11/2009 (Agence Europe) - The European Commission has opened a consultation exercise that will run until 15 January 2010 on the revision of Directive 2002/87/EC on prudential surveillance of conglomerates active in banking and insurance. Directive 2002/87/EC complements other EU directives on prudential supervision of banks (known as the Basel II Directive) and insurance (known as the Solvability II Directive). The revision was scheduled under the rules currently in force but will of course adapt the rules as necessary in the light of the 2008 financial crisis that highlighted the increased risk to financial stability of growing interpenetration of different arms of the financial market. The Commission will be asking interested parties for their views on four issues - transparency about the structure of conglomerates that sometimes comprise more than 1,000 separate entities; how to deal with unregulated sections of a conglomerate; how to define relevant capital requirements for conglomerates in the light of increased capital requirements for banking and insurance; and the compatibility at conglomerate-level of changes to director pay and bonuses in the banking and insurance worlds.
The definition of a conglomerate depends on quantitative matters like solvency ratios. Portfolio management companies may also be included as bodies that can be part of a conglomerate. The current quantitative thresholds and lack of clarity on portfolio management companies have led to the definition of conglomerates including bodies not truly subject to the risks inherent in financial companies and not including complex bodies that were in the EU legislative firing line when it adopted Directive 2002/87/EC, explains the Commission in its consultation document. In order to ensure a better match between the definition process and the actual risks run by a company, the Commission suggests using a raft of qualitative indicators like income structure, off-balance sheet business, the relative scale of a company's various bodies compared with their markets, and the actual structure of the company in question. The Commission wants to know whether these indicators are suitable and whether they should be used in addition to or instead of the quantitative indicators.
Updated in June 2009, the public list of financial conglomerates lists 59 with headquarters in the EU or the European Economic Area. Eight have their “coordinator” (the competent authority responsible for supplementary surveillance) in France, six in Germany/Italy/ the United Kingdom, five in Norway/the Netherlands/ Sweden, three in Austria/Portugal, two in Belgium/Ireland/Denmark and one in Bulgaria/Finland/Spain/Greece/the Czech Republic /Slovenia. (M.B./transl.fl)